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Risky BusinessRisky Business
Avneet Mathur (PMP)
Essentials of Risk ManagementEssentials of Risk Management
What is a Project?A project is a temporary endeavor
undertaken to produce a unique product or service
Temporary – Definitive beginning and endUnique – New undertaking, unfamiliar ground
Temporary UniqueCharacteristics of Projects
Risk RISK can be defined as “the threat or
probability that an action or event, will adversely or beneficially affect an organization's ability to achieve its objectives”*.
In simple terms risk is ‘Uncertainty of Outcome’, either from pursuing a future positive opportunity, or an existing negative threat in trying to achieve a current objective.
* Luhmann 1996:3
Issue vs. Risk
TODAY FUTURE
ISSUE RISK
Issue vs. Risk
If not fixed today, task stops If not identified, may become issue later
ISSUE RISK
Issue… already impacting the cost, time or quality
Risk… POTENTIAL negative impact to project
What’s the Plan?
Identification Quantification Response
Monitoring and Control
Identification Risk Types
Business (risk to overall business) Delivery (risk to project delivery) Technical (specific to particular technology)
Cause Impact
Vendor not meeting deadline Budget will be exceeded
"The vendor not meeting deadline will mean that budget will be exceeded"
QuantificationRisk
LikelihoodImpact
QuantificationTitle Score Description
Very low 2020 Highly unlikely to occur based on current information, as the circumstances likely to trigger the risk are also unlikely to occur.
Low 40Unlikely to occur. However needs to be monitored as certain circumstances could result in this risk becoming more likely to occur during the project.
Medium 60 Likely to occur as it is clear that the risk may eventuate.
High 80 Very likely to occur, based on the circumstances of the project.
Very High 100Highly likely to occur as the circumstances that will cause this risk to eventuate are also very likely to eventuate
Title Score Description Impact *
Very low 20 Insignificant impact on the project. -
Low 40 Minor impact on the project. < 5%
Medium 60 Measurable impact on the project. 5 - 10 %
High 80 Significant impact on the project. 10 - 25 %
Very high 100 Major impact on the project. > 25%
* Deviation in scope, scheduled end-date or project budget
IMP
AC
TL
IKE
LIH
OO
D
Quantification
Priority = [Likelihood + Impact] ------------------------------
2
Priority Score Priority Rating Priority Color-----------------------------------------------------------------------0–20 Very Low Black21–40 Low Green41–60 Medium Yellow61–80 High Orange81–100 Very High Red
Risk ID Likelihood Impact Priority Rating1.1 20 80 50 Medium1.2 80 60 70 High1.3 100 40 70 High2.1 40 20 30 Low2.2 90 100 95 Very High2.3 20 80 50 Medium
Response
Risk ID Rating Preventive ActionsAction
ResourceActionDate
ContingentActions
ActionResource
ActionDate
2.2 Very High Clearly identify theexpected businessbenefits
Project sponsor DDMMYY Measure the actual business benefits achieved by the project
Project Manager
DDMMYY
2.3 High All requirements need to be well defined.
Project sponsor DDMMYY Stakeholders need to sign-off on the requirements.
Project Manager
DDMMYY
… …
Address risks rated based on severity . Very-High-rated risks warrant the highest priority, and should be addressed before the less severe classes of risks, and should be tracked until they can be downgraded.
Create a Risk Schedule to address these risks. In a risk schedule, for every risk identified, preventive actions are
listed that are required to reduce the likelihood of the risk occurring, as well as the contingent actions needed to reduce the impact to the project should the risk occur.
Monitoring and Control Continually monitor risks to identify any change
in the status, or if they turn into an issue.
Hold regular risk reviews To identify actions outstanding, risk probability
and impact Remove risks that have passed Identify new risks
Case Study – Buying a Used Car online Requirements
Buy a car over the internet Price less than $15,000 Reliable Specific make and model Mileage
Case Study – Buying a Used Car online Sample Risks
Buy a car over the internet Most people would say don’t! to eliminate the risk, but this is a
requirement Websites that do not have good ratings
Price less than $15,000 Owner may increase price or add additional cost after finalizing
the deal. Hidden cost
Reliable Does not need frequent repairs Does not breakdown Good brand
Specific make and model Not getting the same model after finalizing the car
Mileage Odometer rollback
Case Study – Buying a Used Car online Risk Quantification
Buy a car over the internet Websites that do not have good ratings
Price less than $15,000 Owner may increase price or add additional cost after finalizing
the deal. Hidden cost
ID Likelihood
Impact Priority
1.1 40 60 (40+60)/2 = 50
ID Likelihood Impact Priority
2.1 20 40 (20+40)/2 = 30
Medium
Low
Case Study – Buying a Used Car online Risk Quantification
Reliable Does not need frequent repairs Does not breakdown Good brand
Specific make and model Not getting the same model after finalizing the car
ID Likelihood Impact Priority
3.1 60 100 (60+100)/2 = 80
3.2 20 80 (20+80)/2 = 50
3.3 40 80 (40+80) /2 = 60
ID Likelihood Impact Priority
4.1 20 40 (20+40)/2 = 30
High
Medium
Medium
Low
Case Study – Buying a Used Car online Risk Quantification
Mileage Odometer rollback
ID Likelihood Impact Priority
5.1 80 80 (80+80)/2 = 80 High
Case Study – Buying a Used Car online Risk Response
Risk ID Rating Preventive ActionsAction
ResourceActionDate
ContingentActions
ActionResource
ActionDate
5.1 High Get a Car Fax report and check mileage history
Project sponsor DDMMYY Avoid cars with no car fax history.
Project Manager
DDMMYY
1.1 Medium Check website rating before initiating a purchase
Project sponsor DDMMYY Avoid “suspicious websites” or too good to be true deals.
Project Manager
DDMMYY
… …
Summary Risk management is a project management tool for
handling events that might adversely impact the project, thereby increasing the likelihood of success.
A sound process like this removes the uncertainty and empowers the project manager to complete their project within schedule and within budget.
Asses Risk
Identify Risk Analyze Risk Prioritize Risk
Control Risk
Mitigate Risk Control Risk Measure Risk
About the Author
Avneet Mathur is a Certified Project Management Professional, as awarded by the Project Management Institute, USA and has been involved in IT for more than a decade.
He holds an MBA in General Business Administration, with an additional Master's Degree in Computer Science and Networking from University of Missouri, Kansas City. He also has a Bachelor's Degree in Computer Science from the Aurangabad University, India. He can be reached at [email protected]
About Project PerfectProject Perfect is a project management software
consulting and training organisation based in Sydney Australia. Their focus is to provide organisations with the project infrastructure they need to successfully manage projects.
Project Perfect sell “Project Administrator” software, which is a tool to assist organisations better manage project risks, issues, budgets, scope, documentation planning and scheduling. They also created a technique for gathering requirements called “Method H”, and sell software to support the technique. For more information on Project tools or Project Management visit www.projectperfect.com.au
